Final Thoughts
Final Thoughts
Written by John Packard
August 9, 2021
The U.S. Senate passed the $1 trillion infrastructure bill. The bill includes $550 billion in new spending. The bill calls for $110 billion for roads, bridges and major infrastructure projects. It also includes $40 billion for bridge repair and replacement, $39 billion to modernize public transit, $66 billion for passenger and freight rail, $65 billion to improve broadband infrastructure, $17 billion for ports and $25 billion for airports.
The bill also includes $7.5 billion for electric vehicle chargers and $7.5 billion for zero and low emission buses and ferries. Also included is $65 billion to rebuild the electric grid, $55 billion to replace lead pipes in the water systems, with another $50 billion to protect the systems from drought, floods and cyber-attacks. There is also $21 billion to clean up Superfund and brownfield sites, reclaim abandoned mine land and cap orphaned gas wells.
The bill is not yet law as it needs to be passed by the U.S. House of Representatives.
It is expected to become law, and if so it would be the first major infrastructure bill of this size since the 1960s. The bill would mean a great deal for the steel industry as many of the projects will need steel plate, long products (rebar/beams), and sheet steel (EV charging stations, airports).
To be or not to be, that is the question…
Are we seeing signs of a top or is it a bit premature? That is the real question being asked by those involved with the steel industry.
Steel prices were flat to up again this week as benchmark hot rolled coil reached a new milestone at $1,900 per ton ($95.00/cwt).
Spot availability is still constrained for most of the data responders reporting to us this week. Most continue to be on allocation or on strict controls when it comes to contract tons.
Based on a conversation I had with a large hot rolled service center buyer, lead times out of most of the HRC mills are in late September/early October (4-7 weeks). This would be an improvement from the 10 weeks we have been collecting through our surveys (next survey is next week).
Keys we are watching carefully: Service center inventories, mill lead times, changes in demand, changes in supply, foreign steel imports, and the spread between foreign and domestic steel prices.
All of these items will be discussed during the SMU Steel Summit Conference on Aug. 23-25.
For anyone who plans on attending the 2021 SMU Steel Summit Conference, I highly recommend you attend tomorrow’s (Wednesday, Aug. 11) SMU Community Chat Webinar. The webinar will briefly cover our program. The bulk of the program will cover the Steel Summit Conference platform and how to use it effectively, as well as the safety protocols that will be in place at the event. We will answer your questions as to what we are doing to help reduce (we cannot eliminate) the COVID risk for those attending the conference in person. You can register for this free webinar by clicking here.
As always, your business is truly appreciated by all of us here at Steel Market Update.
John Packard, President & CEO, John@SteelMarketUpdate.com
John Packard
Read more from John PackardLatest in Final Thoughts
Final Thoughts
Steel equities and steel futures fell hard after news broke earlier this week that the US and Mexico might reach an agreement that would result in the 50% Section 232 tariff coming off Mexican steel. The sharp declines didn’t make much sense, especially if, as some reports indicate, Mexico might agree to a fixed quota. They didn't make sense even if steel flows between the US and Mexico remain unchanged.
Final Thoughts
Even before the news about Mexico, I didn’t want to overstate the magnitude of the change in momentum. As far as we could tell, there hadn’t been a frenzy of new ordering following President Trump’s announcement of 50% Section 232 tariffs. But higher tariffs had unquestionably raised prices for imports, which typically provide the floor for domestic pricing. We’d heard, for example, that prices below $800 per short ton for hot-rolled (HR) coil were gone from the domestic market – even for larger buyers.
Final Thoughts
I want to draw your attention to SMU’s monthly scrap market survey. It’s a premium feature that complements our long-running steel market survey. We’ve been running our scrap survey since late January. And over just that short time, it’s become a valuable way not only for us to assess where scrap prices might go but also to quantify some of the “fuzzy” indicators - like sentiment and flows - that help to put the price in context.
Final Thoughts
I think there is an obvious case for sheet and plate prices going higher from here. That’s because, on a very basic level, the floor for flat-rolled steel prices, which is typically provided by imports, is now significantly higher than it was a week ago.
Final Thoughts
We're about to hit 50% Section 232 steel tariffs. What could happen?